What Estate Planning Documents Do I Need?
Whether you need a will, revocable trust, irrevocable trust, testamentary trust, life insurance trust, or supplemental needs trust depends on your particular situation and your goals. At Holly Lynch Law, we will sit down with you and find out what is important to you and determine the best way to accomplish your goals, whether they be protecting your assets, providing for your minor children after your death, ensuring that your personal property and real estate go to your loved ones, minimizing estate taxes upon your death, or avoiding an expensive probate process.
Everyone should have a will, and if you have minor children, it is even more critical that you have one, as it provides for who will take care of them if you and your spouse die. Drafting a will is one of the most basic things a person can do to ensure that his or her estate goes where he or she wants it to go. It also designates who will administer the will, and courts give priority to person(s) named in the will.
Many young couples delay creating a will because they cannot decide on a guardian. No one will be able to care for your children as well as you can, but it is important that if something were to happen, you get a say in who does care for them. Choose someone you would want now; you can change the named guardian as often as you want or need to as circumstances change.
If you are retirement age or older and married, a will with a testamentary trust can help protect assets for Medicaid purposes for a spouse. It is important to create an estate plan well before either spouse may need nursing home care, or in the case of taxable estates, before death, as there are ways to protect assets but only if planning is completed years before needing to enter a nursing home.
In Massachusetts and New Hampshire, if a person dies without a will (intestate), that person’s estate will pass according to a statutory scheme. This statutory disposition may be inconsistent with a person’s wishes, but with a will, you can customize your provisions so that what you have goes to exactly whom you want it to, and in quantities that you determine, not distant relatives or the Commonwealth.
There are several reasons to have a trust, but not everyone needs a trust. Revocable (living) trusts take property out of the probate estate, allowing for a smoother transition upon your death and the avoidance of probate. This is especially important in New Hampshire, where probate administration usually requires the executor to furnish a bond. Because they are not recorded, trusts also take your property out of the public records, giving you some privacy over your estate. Revocable trusts also govern how your children or other beneficiaries will receive their inheritances, according to terms that you choose.
Irrevocable trusts protect your assets by taking them out of your estate completely, which helps eliminate or lower estate taxes (which is important in Massachusetts) and enables one to qualify for government benefits. They also protect assets from creditors. And although you do cede control of your assets, you can still receive income from an irrevocable trust. And irrevocable life insurance trusts (ILITs) keep the proceeds of life insurance death benefits out of the estate, thus lowering or eliminating estate taxes.
Testamentary trusts are created within the will and are good planning tools for older couples who may require nursing home care at some point in the future. The assets from the will when one spouse dies create a testamentary trust for the survivor spouse that is out of that survivor spouse’s estate and control, making them inaccessible and enabling the spouse to qualify for government benefits.
Supplemental (or special needs) trusts allow the beneficiary to receive money from the trust in addition to his or her government benefits. Either the beneficiary or a third party (such as a parent) may establish them. There is more information on the Special Needs Planning page.
Durable Power of Attorney
A durable power of attorney (DPOA) is another document, like the will, that every person should have. In some ways, it is the most important document a person should have. It allows someone to act on your behalf if you are unable to, for any reason. Without one, if something were to happen to you, your loved one would have to obtain a statement from one or more physicians declaring your incompetence and then petition the court to become your guardian or conservator—a cumbersome process that can easily be eliminated with a valid durable power of attorney. The durable power of attorney lasts until death--even through a person's incapacity.
Health Care Proxy
A health care proxy (HCP) is easy to establish without the services of a lawyer. But the benefit of having a lawyer draft is that there may be scenarios that you hadn’t thought about that a standard form does not contain or address. Most lawyers will also include HIPAA authorizations and, in New Hampshire, advance directives with your HCP. Like the durable power of attorney, you can revoke the health care proxy at any time if you are competent. And your agent may not make any medical decisions on your behalf so long as you are still able and wish to.
Advance Directive (Living Will)
An advance directive lets your health care agent know your wishes about life-sustaining treatment, psychiatric administration, and other matters. While it is not legally enforceable in Massachusetts, it does provide your health care agent with guidance on what you would want him or her to do. These are binding documents in New Hampshire, however.
To set up a consultation to discuss your estate planning needs in depth, contact us online or call (978) 494-0272.